Alpha and Omega Semiconductor Limited (AOS), a designer, developer and global supplier of a broad range of power semiconductors and power ICs, today announced that it has entered into a preliminary agreement with the state authority of Chongqing, China, to form a joint venture for a new state-of-the-art power semiconductor manufacturing facility in the Liangjiang New Area of Chongqing.
Under the proposed agreement, the initial capitalization of the joint venture is expected to be approximately $300 million. The Chongqing authority would own 49% of the venture's equity and invest in cash. AOS would own 51% of the equity and contribute primarily its existing assembly and testing equipment as well as certain intellectual property related to the operation of the facility.
"We are excited that this joint venture with the authority of Chongqing offers the prospect of creating new competitive advantages that can fuel growth for both Chongqing and AOS," said Dr. Mike Chang, chairman and CEO of AOS. "We expect the venture to deliver significant cost savings for AOS and allow us to reduce our tangible assets as well as drive meaningful improvements in working capital and capital expenditures. We believe this partnership will open doors to new customers and expand our sales in China, and particularly in the Chongqing area. The venture represents an important step in our continuing strategy to improve long-term profitability by accelerating growth, reducing costs, and diversifying our offerings of power semiconductor products."
The joint venture is expected to begin manufacturing operations in 2017. AOS will gradually move its assembly and testing equipment from the company's existing facility in Shanghai to the lower-cost Chongqing region. We expect our AOS Shanghai will continue as a company's supply chain management center and technology center for high-value products. At a later date, the joint venture expects to construct a 12-inch fabrication facility that is suited for the production of power semiconductors.
The parties are negotiating a definitive joint venture agreement setting forth in more detail the financial and business terms, as well as the timeline, of the proposed project, which is expected to be a multi-year commitment divided into several stages. The execution of the joint venture agreement will be subject to various conditions, including the relevant government agency review and approval.